You Are Working on a Bid to Build Five Playgrounds

question 66

Multiple Choice

You are working on a bid to build five playgrounds a year for the next two years. This project requires the purchase of $62,000 of equipment which will be depreciated using straight-line depreciation to a zero book value over two years. The equipment can be sold at the end of the project for $39,001. You will also need $12,000 in net working capital over the life of the project. The fixed costs will be $18,000 a year and the variable costs will be $49,000 per playground. Your required rate of return is 15% for this project and your tax rate is 34%. What is the minimum amount, rounded to the nearest $100, you should bid per playground?

• A) $57,600
• B) $57,900
• C) $58,200
• D) $58,500
• E) $58,800

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